European Stocks Rise After Significant Fed Cut; Next Soars on Upbeat Outlook

European stock markets experienced a significant rally on Thursday as investors reacted to the Federal Reserve’s aggressive start to its easing strategy, ahead of the Bank of England’s upcoming policy meeting.

As of 03:05 ET (07:05 GMT), the DAX in Germany was up by 0.9%, the CAC 40 in France increased by 1.4%, and the FTSE 100 in the U.K. rose by 0.9%.

### Fed Cuts Rates Aggressively

The Federal Reserve made a bold move on Wednesday by cutting interest rates by 50 basis points, bringing its benchmark rate down to a range of 4.75% to 5%. This decision marks the beginning of a rate-cut cycle aimed at bolstering the economy after a prolonged struggle with rising inflation.

Fed officials now anticipate an additional two rate cuts of 25 basis points in 2024, compared to their previous estimate in June, which projected only one cut. While this aggressive approach might raise concerns regarding the health of the U.S. economy, Fed Chair Jerome Powell sought to soothe these fears by indicating that the risks of heightened inflation and a weakening labor market are now balanced.

### BoE Expected to Maintain Rate

All eyes are now on the Bank of England, which is set to announce its latest policy decision later today. Analysts expect the BoE to keep its benchmark rate steady at 5.0%, following a previous cut in August. Policymakers are likely to continue their cautious approach, emphasizing the importance of not easing too quickly or too soon.

The UK’s inflation rate stood at 2.2% on an annual basis last month, close to the central bank’s medium-term target, although services inflation remains high at an annual rate of 5.6%.

### Next Raises Profit Outlook

In corporate news, shares of British retailer Next surged over 5% after the company announced it is on track to achieve nearly £1 billion in annual profit. This marks the second upward revision of its outlook within two months, following stronger-than-expected trading results.

### Crude Prices Rise After Fed Decision

Crude oil prices rose in the wake of the Fed’s significant rate cut, which has raised hopes for increased economic activity in the world’s largest consumer of oil. However, concerns about global demand continue to affect the market, limiting gains.

As of 03:05 ET, Brent crude was up 0.7% to $74.19 per barrel, while West Texas Intermediate (WTI) futures increased by 0.8% to $70.41 per barrel. Recent U.S. government data indicated a larger-than-expected draw of 1.63 million barrels in crude inventories, although this was counterbalanced by builds in distillates and gasoline stocks.